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CASE NO.: Appeal (civil)  7231 of 2002

PETITIONER: ASST. COMMNR. OF COMMERCIAL TAXES & ORS

RESPONDENT: RUCHI SOYA INDUSTRIES LTD

DATE OF JUDGMENT: 24/04/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: JUDGMENT                                                 1

                           IN THE SUPREME COURT OF INDIA

                           CIVIL APPELLATE JURISDICTION

                           CIVIL APPEAL NO.7231 OF 2002

ASST. COMMNR. OF COMMERCIAL TAXES & ORS.                            Appellant (s)

             VERSUS

RUCHI SOYA INDUSTRIES LTD.                            Respondent(s)

                                         JUDGMENT

ASHOK BHAN, J.

1.            The State of West Bengal and others, the appellants herein, have filed this

appeal against the final judgment dated 13/02/2002 of the High Court of Calcutta in

W.P.T.T. 32 of 2002, by which the High Court has dismissed the writ application of the

appellants herein holding, inter alia, that sanction to retain the seized records was not in

conformity with proviso (b) to Section 66 of the West Bengal Sales Tax Act, 1994 (for short

’the Act’)

2.     The respondent is a re-seller of "Neutrela" Soya beans food product, palm fatly acid

distillate, acid oil and RBD Palmolein oil after importing the same from out side the State  of

West Bengal as well as by making purchases within the State of West Bengal.

3.     On 18th October, 2000, the files, books of accounts and documents kept at the place o f

the business of the respondent were seized pursuant to a search conducted by the officers

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attached with the Central Section of Commercial Tax Directorate.              The books and

documents were seized by the commercial Tax Officers for the reason that the respondent

was evading payment of tax under the Act and the said books of accounts and documents as

detailed in the seizure receipt are required for taking action under the provisions of the A ct.

In the report relating to the said seizure it was stated that the dealer was evading tax by

floating dummy files and fabricating documents. According to the appellants since the

seized books of accounts, registers and other documents, on the basis of which investigation

was to be conducted, were of extensive nature, the assessment could not be completed within

a period of one year as stipulated under Section 66 of the Act.     The seizure in the insta nt

case had taken place on 18th October, 2000. The period of one year was to expire on 17th

October, 2001. Show cause notice dated 9th October, 2001 was sent to the respondent by

speed post on 10th October, 2001 requiring its representative to appear before the Additiona l

Commissioner, Commercial Taxes on 12th October, 2001 to show cause as to why the seized

records should not be retained for a further period of one year beyond 18th October, 2001.

As no one on behalf of the respondent appeared on 12th October, 2001 and only a few days

were left before the prescribed period of one year was to lapse, the Additional Commissioner

vide its order dated 12th October, 2001 granted sanction for retention of the seized records

till 18th October, 2002 to enable the investigating officer to complete the examination of t he

seized records and the said order was     sent to the respondent by speed post.      The sai d

sanction as well as show cause notice were received by the respondent on 22nd October, 2001.

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4.    Aggrieved by the said order passed by the Additional Commissioner, Commercial

Taxes, the respondent filed an application under Section 8 of the West Bengal Taxation

Tribunal Act, 1987 before the West Bengal Taxation Tribunal, Calcutta (for short ’the

Tribunal’) being Revision Case No.RN 450/2001, seeking a direction to assessing officer to

forthwith release the books of accounts, documents and records seized on 18th October, 2001

under Section 66 of the Act and to pass an order quashing and/ or setting aside the

purported order dated 12th October, 2001 passed by the Additional Commissioner according

sanction for retention of the seized books of accounts and records, till 18th October, 2002

under Section 66(1)(b) of the Act on the ground that no opportunity whatsoever was given to

the respondent before passing the said order.

5.    The Tribunal by its order dated 4th January, 2002 allowed the application of the

respondent. Relying upon a decision in C.I.T. West Bengal-III and others Vs. Oriental

Rubber Works [1984(1)SCC 700], the Tribunal held that the order of retention had become

invalid as the same was not communicated to the applicant within the prescribed period of

limitation and accordingly set aside the order dated 12th October, 2001 passed by Additional

Commissioner of Commercial Taxes with a direction to release the books of accounts,

records and documents seized on 18th October, 2000 forthwith.

6.    Aggrieved by the order passed by the Tribunal, the appellants filed a writ application

under Article 226 of the Constitution of India seeking setting aside of the order passed by

the Tribunal. The High Court by the impugned order has dismissed the writ application

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thereby upholding the order passed by the Tribunal. It has been held by the High Court

that the notice was issued to the respondent on 10th October, 2001 to attend the hearing on

12/10/2001 to show cause as to why the seized records should not be retained beyond the

period of one year. The said notice was admittedly received by the respondent on 22nd

October, 2001 which was beyond the period of one year as prescribed by Section 66, thus

denying the respondent an opportunity of being heard which was the object of the notice. It

was also held that the order passed by the Additional Commissioner granting sanction to

retain the seized records, was sent to the respondent on 18th October, 2001 which was

received by him on 22nd October, 2001. It is not expected that an order dispatched on 18th

October, 2001 would be served on the same day. That the very purpose of issuance of such

notice was frustrated as the respondent was left with no time to submit his reply. That the

entire exercise was undertaken in a mechanical way as the order did not even mention as to

(i) whether the notice of hearing has been received by the respondent, or (ii) whether he ha d

been heard or not or (iii) as to why was it necessary to retain the seized records for

examination for another year, although the said record had already been in the custody of

the appellants for a period of one year. The High Court thus agreed with the Tribunal and

dismissed the writ application.

7.     The said order of the High Court is under challenge before us.

8.     The relevant portion of Section 66 of the Act dealing with extension of time is state d

hereinbelow for reference:

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                                 "66. Seizure of dealer’s accounts:- If the                     Commissioner, an Additional Commissioner or any person                     appointed under sub-section (1) of Section 3 to assist the                     Commissioner, has reason to suspect that any dealer is                     attempting to evade payment of any tax, he may, for reasons                     to be recorded in writing, seize such accounts, registers or                     documents of the dealer (including computerised or                     electronic accounts maintained on any computers or                     electronic media) as may be necessary and shall grant a                     receipt for such accounts, registers or documents seized by                     him and shall retain all or any of them only for such period                     as may be necessary for examination thereof or for                     prosecution or for any other purpose of this Act.                     Provided that:-                     (a)    the Commissioner or an Additional Commissioner                     shall not retain any of the accounts, registers or documents                     seized by him under this section for a period exceeding one                     year from the date of the seizure unless he records in writing                     the reasons therefor, and                     (b)    any person appointed under sub-section (1) of Section                     3 to assist the Commissioner shall not retain any of the                     accounts, registers or documents seized by him under this                     section for a period exceeding one year from the date of                     seizure unless he states the reason in writing therefor and                     obtains sanction of the Commissioner in writing in respect                     thereof."

9.     A reading of proviso (a) and (b) of Section 66 makes it clear that either of the two

conditions must be fulfilled before such extension is given, viz. (a) reasons in writing mus t be

recorded by the Commissioner or Additional Commissioner for extending the period or by a

person appointed under sub-Section (1) of Section 3 to assist the Commissioner or the

Additional Commissioner and (b) if the books are to be retained by an officer appointed

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under sub-Section(1) of Section 3 to assist the Commissioner then that officer shall not ret ain

the seized books beyond the prescribed period unless he records reasons in writing therefor

and seeks approval of the Commissioner.

10.    An inference can well be drawn from these two provisions that if either of these two

conditions are not fulfilled, such extension shall become unlawful and the concerned officer

has to return the books or documents forthwith. However, a bare perusal of the proviso (a)

and (b) of Section 66 would show that there is no requirement in law of either (i) to convey

the reasons or the orders passed by the Commissioner/Additional Commissioner to the

assessee or (ii) that it should be conveyed before the expiry of one year of the seizure of  the

books or the documents.

11.    This Court in C.I.T. West Bengal-III and others Vs. Oriental Rubber Works (supra)

while interpreting Section 132(8) of the Income tax Act which in substance is identical with

the provisions of Section 66 of the West Bengal Sales Tax Act held:

                                        "...It is true that sub-section                            (8) does not in terms provide that the                            Commissioner’s approval or the recorded                            reasons on which it might be based should                            be communicated to the concerned person                            but in our view since the person concerned                            is bound to be materially prejudiced in the                            enforcement of his right to have such books                            and documents returned to him by being                            kept ignorant about the factum of fulfilment                            of either of the conditions it is obligatory                            upon the Revenue to communicate the                            Commissioner’s approval as also the                            recorded reasons to the person concerned.

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                          In the absence of such communication the                            Commissioner’s decision according his                            approval will not become effective."

12.    No doubt it is laid down in this judgment that the Commissioner’s approval as also

the recorded reasons may be communicated to the person whose books of account have been

seized but it does not say that such approval and the reasons therefor be communicated

before the expiry of the maximum period prescribed for retention of books of account.

13.    This Court in the said judgment has further dealt with sub-sections (10) and (12) of

Section 132 of the Income Tax Act. These two provisions read as under :

                         "(10) If a person legally entitled to the books                           of account or other documents seized under                           sub-section (1) or sub-section (1-A) objects                           for any reason to the approval given by the                           Commissioner under sub-section (8), he may                           make an application to the Board stating                           therein the reasons for such objection and                           requesting for the return of the books of                           account or other documents.

                         (11) ... ... ... ...

                         (12) On receipt of the application under sub-                           section (10) the Board ... may, after giving                           the applicant an opportunity of being heard,                           pass such orders as it thinks fit."

14.    As per these provisions a statutory right vests in the person, whose books have been

seized, to approach the Board to object to the approval. Therefore, as a logical corollary,  it

was necessary to communicate the Commissioner’s approval as also the reasons therefor.

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15.    It may not be out of place to mention here that in the said judgment this Court was

dealing with the provisions of Income Tax Act and in the present case, we are concerned

with the provisions of West Bengal Sales Tax Act, 1994 and there is no provision in the Act

parallel to sub-sections (10) and (12) of the Income Tax Act in the Act being dealt with her e.

16.    The High Court under some misconception assumed that this Court had held that the

reasons had to be communicated before the expiry of one year of the seizure of the books or

documents and/     or the assessee was required to be heard before passing          the orde r

extending the period beyond the prescribed period of one year.       To that extent, the ord er

passed by the High Court deserves to be set aside and is accordingly set aside.

17.    The Additional Commissioner while granting sanction to retain the seized records has

not only recorded reasons therefor, but the same were communicated also in accordance

with the judgment of this Court in the case of Oriental Rubber Works (supra).        Thus, t he

condition prescribed by law to record reasons is fulfilled. The order was despatched the

same day which was received by the assessee a few days later. The delay in no way has

caused any prejudice to the assessee.      Moreover, we are informed that the books of

accounts/documents were returned to the assessee after the passing          the order by the

Tribunal. To that extent, the appeal has become infructuous, but since the point involved is

of recurring nature, we thought it appropriate to record a finding regarding the correctness

or otherwise of the view taken by the High Court on merits.

18.    In case the investigation or assessment is not complete then the respondent whose

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books of accounts have been returned, he      may not be asked to re-deposit the books of

accounts with the assessing officer but as and when he is called upon to produce the books o f

accounts/documents which were returned to the assessee, the assessee shall be under an

obligation to produce the documents before the authorities as and when asked to do so. The

authorities would be at liberty to retain photostat copies of the documents, if not already

kept by them while returning the books.

19.            The appeal stands disposed of in the above terms and there will be no orders

as to costs.

                                                             ....................J.                                                               (ASHOK BHAN)

                                                             ....................J.                                                               (DALVEER BHANDARI) NEW DELHI; April 24, 2008.